While the cash payments are never guaranteed, I reckon dividend stocks are by far the most convenient way of making passive income. Today, I’m highlighting three stocks from the FTSE 250 I’d be comfortable buying now and holding for a very long time (or ‘forever’, as Warren Buffett would say).
Reliable payer
Last year aside, drinks giant Britvic (LSE: BVIC) has a great track record of regularly hiking its dividends. That makes it attractive at a time of rising prices, since my buying power should be maintained (and potentially increased).
Right now, analysts have the business returning 27.8p per share in FY22 — a stonking 18% increase on that expected for the financial year just completed.
Using the current share price, this equates to a decent yield of 3.1%. Although buying single company stocks traditionally involves more risk, it’s worth noting this is far more than the 1.9% offered by the index.
Aside from its income credentials, Britvic strikes me as a defensive option, thanks to its bumper portfolio of brands. Returns on capital have also been consistently good. And, thanks to exporting to more than 100 countries, earnings are about as geographically diversified as I could want.
Of course, there’s a chance global supply chain issues and ongoing investment will hit sentiment in the short term. So we could see a bit of selling pressure (and potentially a great opportunity to buy) when full-year results arrive on 24 November.
Meaty hiker
I doubt meat supplier Cranswick (LSE: CWK) hits many income investors’ radars. That’s understandable. A forecast yield of 2% doesn’t grab the attention quite like one offering fives times this amount does. However, I think this qualifies as a stellar dividend stock.
The fact is that CWK is an excellent source of rising cash returns with an average growth rate of over 13% per year. That’s impressive, considering capital expenditure in this (low margin) industry can often be pretty hefty.
In addition to its rising dividend stream, Cranswick has also delivered solid capital growth. Holders would have seen a 55% gain since October 2016. That’s better than the 32% achieved by the FTSE 250 index. Clearly, this margin will have been even greater had those dividends been re-invested.
Since I doubt whether many people are prepared to give up their sausages and bacon any time soon, CWK should go on rewarding investors long into the future.
Volatility hedge
A final FTSE 250 dividend stock I’d feel comfortable buying today is one I’ve already held for a number of years. That’s online trading platform provider IG Group (LSE: IGG).
Now IGG may not be every investor’s cup of tea for a few reasons. For one, the industry in which it operates is always susceptible to regulatory scrutiny. It’s also fair to say that IG faces significant competition for clients. That’s despite it being the recognised market leader in the UK.
As credible as these concerns are, I continue to regard this stock as a potentially great hedge against market volatility. When emotions run high (as they did last year), trading activity increases and IG benefits. That’s good news for revenues, profits and, ultimately, dividends.
Currently yielding a forecast 5.4% for the current year, analysts have predicted a 10% uplift to IG’s total payout in FY23. With free cash flow looking very healthy and a US market ready to tap, I don’t see this as unrealistic.
